Could Stocks Trigger the Next Bitcoin Bull Market?
Tom Lee, bitcoin’s most infamous prognosticator, made another bold prediction last week. In an interview with CNBC’s “Fast Money,” the head of research at Fundstrat Global Advisors said bitcoin and U.S. stocks will return to all-time highs in the foreseeable future.
Bitcoin and the S&P 500
The S&P 500 Index is almost there, having closed at 3,007.39 on Friday. Bitcoin, on the other hand, still has a very long way to go.
Lee believes bitcoin’s next parabolic run is tied to equities because “in a world without trend, bitcoin doesn’t go up,” he said.
Lee adds: “The next big catalyst, I think, is a decisive breakout in the equity markets, because I think once equities break to an all-time high, bitcoin becomes a risk-on asset.”
Although bitcoin has earned a reputation of being a non-correlated asset, the liquidity boost offered by central banks in their next round of quantitative easing could attract more capital into digital currencies. That’s because institutional investors are diversifying into bitcoin.
“Bitcoin does best when the S&P’s up more than 15%… Bitcoin may be ambidextrous [in] that it works well in a risk-on world, but as you start to get nervous, then you treat it like digital gold.” – Tom Lee (source: CNBC)
Institutional appetite will be put to the test later this month when Bakkt launches the first physically-settled bitcoin futures contract.
Bitcoin’s trading range continued to narrow on Sunday, a sign of declining volatility in the market. BTC/USD traded between $10,266 and $10,383 on Bitstamp. It was last spotted at $10,290, down 0.6%.
Bitcoin’s price has been range-bound for over a week now, with volatility plunging to the lowest level since early May. Bitcoin’s 30-day volatility index fell to 2.59% on Sunday, according to bitvol.info. That figure represents the magnitude of bitcoin’s daily price fluctuations over the past month.
The sharp drop in volatility has been accompanied by an equally large decline in trading volume. Bitcoin’s 24-hour spot volume fell to $441 million on Sunday, according to Bitwise. During the height of the bull market earlier this year, bitcoin’s daily turnover exceeded $3 billion.
At current values, bitcoin has a total market capitalization of $185.2 billion. BTC dominance is now 69.7%, according to CoinMarketCap.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via TradingView.